Trademark Crush: A Perfect Storm is Threatening U.S. Trademark Applicants

Recently, USPTO Commissioner for Trademarks David Gooder wrote on the USPTO Director’s Forum Blog that registrations for U.S. trademarks are up 63% from the same period in 2020. The USPTO received over 92,600 trademark applications in December 2020 alone. This has caused delays in a number of stages in the trademark process, including a current pendency of 75 days (as of July 5, 2021) for the Pre-Examination Unit of a TEAS application. This is compared to a ten-day target. The USPTO also reached a dubious milestone in Q4 2020, breaking the 1 million mark in pending applications, with 1,002,768 in the queue. This has affected trademark registrants from the very beginning of the application process. First Action Pendency (months) in Q1 of 2020 was 2.8 months. For Q1 2021, the pendency was up to 4.0 months, with Q2 trending to almost five months for First Action. Delays like these affect the ability of trademark owners to protect their brands, could cause an increase in consumer confusion and impact the value of legitimate trademarks.

What’s Causing the Surge?

The USPTO admits that the increase is in both foreign and domestic filings and that it is partly related to an increase in e-commerce during the pandemic. At home, people used more food delivery and grocery shopping apps, watched more streaming video content, and of course, attended meetings using video conference software. These have created an increase in applications for trademarks in these services and related industries.

There is also a large increase in the number of COVID-19-related marks, mirroring what we saw in previous years after following like the September 11, 2001 terrorist attacks and the COVFEFE tweet by President Donald Trump. Trademarks, by their nature, can be highly influenced by temporal events and people always want to take advantage of an opportunity that presents itself, even if it is likely to be relatively short-lived. Numerous trademarks have been filed with COVID terms, from the obvious “CORONAVIRUS” and “COVID-19” to more creative filings like “EVEN HATERS HATE CORONA VIRUS”, “COVID PRO QUO”, and “COVID KID.”

Amazon Brand Registry Changes

As if to add to the chaos, in November 2020, Amazon eased requirements for getting on to their brand registry. Instead of requiring sellers to have a federal trademark registration, Amazon now only requires (for some sellers) a federal trademark application to have been filed on a brand name to qualify for the Amazon Brand Registry. With sales in 2020 over $386 billion, any move made by the giant E-tailer will impact the industry. Around two-thirds of the sales at Amazon are done by third-party sellers; these sellers, and the brands that they serve, are doing everything they can to take advantage of the surge in online buying. The Amazon Brand Registry provides benefits to those on the list and provides marketing tools conditioned on entry. Enhanced Brand Content, Stores, Sponsored Brands, and the Brand Dashboard are all provided to sellers on Amazon once they have access to the Amazon Brand Registry. Some have said that entry in the Amazon Brand Registry is “vital” to achieving success on Amazon, which puts pressure on anyone selling through their service to get registered and increases the likelihood that fraudulent registries will occur.

Effects of Global Applications

Data from the USPTO show increases in almost every foreign trademark metric. “Application Filings – Foreign (classes)” went from 53,151 in Q4 2019 to 83,011 in Q4 2020, a 56% increase over that year. Then, 2021 kept that surge going with another 106,025 Filings in Foreign classes in Q1. This is almost a 100% increase from Q4 2019. “Application Filings – Total (classes)” has a 71.3% increase over the Previous FY as of Q1 2021. “Total Active Registrations – Foreign” is also seeing a huge uptick, with over 532,700 registrations to-date in Q2 2021 compared to a total of 510,373 in Q1 2021. This means the USPTO has over 22,000 more registrations in Q2 of this year than it did in Q1 and the data for Q2 isn’t even complete yet.

We know that patent and trademark applications from China have been increasing at the USPTO for many years. According to a USPTO report, there are several non-market reasons for these increases. China has over 70 subsidy programs throughout its provinces that incentivize citizens to register trademarks both domestically and internationally. Often, the value of these subsidies is more than the cost of the registration, creating a situation where registering marks, even without actual intent to use them for commerce, generates income. After Shenzhen and other cities in China began offering subsidies for international trademark applications, the USPTO saw an increase in fraudulent trademark applications originating in China. In January 2020, the China National Intellectual Property Administration (CNIPA) announced an effort to “clean up” these fraudulent filings. However, three months later, in March 2020, China directed its state-owned enterprises to increase by 50% their trademark filings under the Madrid Protocol. Recent data suggests that 38.47% of U.S. trademark applications in the fourth quarter of 2020 came from China-based applicants. Trademark attorney Erik Pelton claims it “may be a form of economic terrorism intended to create delays and chaos in our system” in his blog. Whatever the reason, it is clear that Chinese applicants are likely to continue to be a growing portion of trademark registrations moving forward.

Another recent trend that is clogging the USPTO with applications is a slew of fraudulent “low-cost” trademark broker websites, notably from Pakistan, in which users can apply for registration for as low as $45. The companies Digitonics Labs and Trademark Terminal, and related entities like Trademark Axis and Trademark Falcon, and over 200 websites like ‘trademarkterminal.com’, ‘logoterminal.com’ and ‘designsterminal.com’ and most concerning, ‘usptotrademarks.com’ are responsible for thousands of trademark applications at the USPTO over the past 12 months. Fortunately, most of these applications are receiving initial refusals because they don’t include personal email addresses and phone numbers, instead reusing generic addresses like ‘[email protected]’ and the phone number of the company in place of the applicant’s phone number. Even though examining attorneys are requesting the applicant’s personal email in the office action, the representatives from these organizations appear to ignore the request in follow-up responses, leading to final refusals in a number of cases. In almost 75% of cases, these entities are providing “fake/fabricated” certificates to customers. Not surprisingly, these filings are part of the reason for the USPTO backlog. The Ideas Law Firm managing partner, Ryan Bethell, says, “This campaign has been damaging to a large segment of trademark industry practitioners – especially in terms of industry reputation. At the registry, examination times will be ballooning because of spurious filings; it is overloading them. It is also driving up client acquisition costs, harming the public, and harming the industry as a whole. There are plenty of reasons why this matters, so everyone needs to sit up and take notice.”

On August 5, Commissioner for Trademarks Gooder penned another blog post in which he announced the USPTO’s intent to register the Office’s trademarks in an attempt to curb these fraudulent practices. Gooder said that “misleading solicitations and trademark filing scams are a growing problem” and that the Office “require[s] the additional legal protections afforded the owner of a federally registered trademark in light of the rapid increase in sophistication of those unlawfully passing themselves off as the USPTO.”

What Next?

The USPTO is taking a number of other steps to offset these challenges. They are working on “implementing technology solutions” and “system enhancements” focused on improving process times. They are working with law enforcement agencies to stop the fraudulent activities that are contributing to the backlog, and they are also hiring more attorneys and staff. Interestingly, they don’t mention specific steps they are taking to address the surge in Chinese applications. The office intends for processing times to get back to customary levels, but we shall see how successful they are in the coming months. Until then, trademark owners will have to exhibit patience while waiting for their applications to be processed. We don’t know how long this surge will last, and if it will ever subside.

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